The digitally altered image, which is currently pinned to the top of Zhao's Twitter account, appears to show an Australian soldier holding a knife to the throat of an Afghan child. The post comes after a report alleged Australian special forces unlawfully killed 39 Afghans, something Morrison has called "disturbing".

Morrison demanded an apology on Monday, but China is refusing to back down.

New Zealand Prime Minister Jacinda Ardern has now confirmed Aotearoa has raised concerns with China over the image. 

"Whether it is Canada or Australia or indeed the United States, we observe closely relationships with our major trading partner China and others. But, of course, we always conduct our relationship in our own interests," she told reporters on Tuesday.

"We will speak up on issues that we have concerns about, we will stick to our independent foreign policy, but that doesn't stop us observing what is happening with others.

"I have seen some of the latest discussion over what was a Twitter image… New Zealand has registered directly with Chinese authorities our concern over the use of that image. 

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"It was an unfactual post and, of course, that would concern us. So, that is something that we have raised directly in the manner that New Zealand does when we have such concerns."

Ardern said the image is "not factually correct" and is not a "genuine" image.

She hasn't personally spoken to Morrison about the issue.

Newshub has contacted the New Zealand Chinese Embassy for a response to Ardern's comments.

Leader of the Opposition Judith Collins was asked afterwards whether New Zealand should be getting involved in the exchange between Australian and China.

"That is not something I have turned my mind to or the details of it. But it is certainly something that we will be taking some advice on," she said.

Collins hadn't seen the fake image on Tuesday morning, but when it was described to her and asked if she agreed with Morrison that it was "repugnant", she said: "If it is a false thing, absolutely."

She said the tweet sounded "abhorrent" and backed Ardern's decision to raise concerns with China.

We will speak up on issues that we have concerns about, we will stick to our independent foreign policy, but that doesn't stop us observing what is happening with others.

However, Collins also stressed that New Zealand must take an independent foreign policy stance. She said we have to be careful with how we deal with these issues.

"Particularly for a very small nation, it can sometimes be seen as easier for any country to put pressure on us, certainly financially or in security ways."

She said Australia was "perfectly capable" of dealing with the Chinese Government.

Asked about Morrison's Monday comments, Chinese foreign ministry spokesperson Hua Chunying didn't apologise, instead pointing to the "shocking and appalling" details in the Australian Defence Force report. 

"The Australian side has been reacting so strongly to my colleague's tweet. Why is that? Do they think that their merciless killing of Afghan civilians is justified but the condemnation of such ruthless brutality is not? Afghan lives matter!"

The report makes mention of a 2016 document where a sociologist claims to have heard that two 14-year-old boys were killed by soldiers. ABC says those allegations were "never substantiated". 

There have been several anti-Australian articles written by Chinese state media overnight. The editor of the Global Times, Hu Xijin, said Morrison should "kneel down on the ground, slap himself in the face and kowtow to apologise to Afghans".